Financial optimization system and method

ABSTRACT

An improved investment optimizing system and method. Once an investor or investment advisor determines the appropriate asset allocation and that there are both taxable accounts and tax-deferred or tax-free investment accounts, the invention will optimize/maximize the investor&#39;s ending after-tax asset accumulation, which is the objective of all investors. This is accomplished by allocating the chosen investment vehicles between the taxable and tax-deferred accounts in an optimum way. The invention runs on a computer system and searches for an allocation which results in a maximal return. Intelligent heuristics measure increased performance based on different asset allocations.

RELATED APPLICATION

[0001] The present application is a continuation-in-part of allowed U.S.Utility Application Ser. No. 09/346,602 filed on Jul. 2, 1999, and alsoincorporates U.S. Provisional Application No. 60/194,158 filed on Apr.3, 2000, herein by reference.

FIELD OF INVENTION

[0002] The present invention is directed towards financial analysis, andmore particularly towards investment location optimization software.

BACKGROUND

[0003] Recent changes in the tax code and the ability of individuals tomanage the investment of their retirement accounts have created manyopportunities for maximizing growth over time, but have also introduceda new level of complexity into individual investment decision.Determining the best investments and strategy is a daunting task. Afundamental problem faced by all investors and financial advisors iswhich account-retirement or taxable-to put each investment in with theirgiven asset allocation. Two factors strongly influence these decisions.First is the asset classes, such as stocks and bonds (and their subcategories) each which has various advantages and disadvantages,including expected return and risk. Second is the tax status of both theinvestor and the investment, which typically breaks down into taxableinvestment accounts and tax deferred investment accounts (e.g., 401Ksand IRAs). A decision must be made about how to distribute the assetclasses between the taxable accounts and tax deferred retirementaccounts. For example, if a split of 60% stock (or stock funds) and 40%bonds (or bond funds) make sense for an investor (it's an appropriateasset allocation), and this investor has $75,000 in an IRA and $25,000in a taxable brokerage account, the question is “where should the$60,000 stock and the $40,000 bond allocations be located for maximumlong-term benefits?” Should he hold the stocks entirely in theretirement account or hold $25,000 in the taxable account and $35,000 inthe IRA? The present investment addresses and optimizes this question.

[0004] Because of the different income and growth characteristics ofinvestments in the various asset classes and the different ways andrates at which they are taxed, and by whom (Federal, state, local) thedecision about which account to put each asset class (investment) has avery significant impact on the after-tax investment accumulation overtime. Financial advisors have been forced to “optimize” as best theycould by applying their knowledge of each investments' characteristicsand knowledge of the tax laws to approximate what they thought would bethe highest after tax accumulation for the target investment horizon.The process is very much a “seat of the pants” exercise and the outcomedepends on the advisor's level of knowledge and their ability tomentally integrate and process a set of highly complex variables.

[0005] As with any uncertain process, advisors and experts disagree uponthe best strategy for investment. An article by Venessa O'Connell in theWall Street Journal (Capital-Gains Tax Cuts Mean It's Time To ReviewYour Tax-Deferred Strategy, WSJ Aug. 29, 1997 page C1) stated that thequestion of whether to keep stocks or bonds in tax-deferred accounts hasbeen debated among the wealthy for years. The article further went on toquote Harold Evensky, a highly respected financial advisor at Evensky,Brown & Katz in Florida, who recommended that high-income investors keepstocks in taxable accounts and favor corporate bonds in tax-deferredaccounts. However, this general advice may not prove optimal, as will beshown below.

[0006] While experts disagree on even the basic strategies, the typicalinvestor often doesn't even address the issue. Financial advisors oftenspend too little time on the issue of investment location, therebyending up with less than optimal investment strategies. More often thannot individual investors are oblivious of the issue to their financialdetriment.

[0007] Several tools and systems attempt to address this problem.Spreadsheets can be constructed to “run the numbers”, but the outcomedepends on the input into the system. By changing input assumptions itis possible to test different scenarios to see which combination gavethe best result. While this is an improvement over the “seat of thepants” method, it is not a true optimizer.

[0008] Similarly, commercial calculators may become available whichobviate the need to construct spread sheets, but perform essentially thesame function as the spreadsheets. The commercial calculators calculateaccumulation amounts over time based on a set of assumptions. Bychanging the assumptions, the user is able to test different sets ofassumptions (strategies). This is an incredibly time consuming andburdensome task given the number of variables and the possible number ofcombinations. A large number of variables must be considered with a hugesearch space. For example, 80 variables will result in over 14 billionpossible combinations. None of the above approaches will yield anoptimum solution.

[0009] There are several other approaches for developing an optimizationsolution for this complex problem with varying degrees of success. Abrute force approach is simply to try every possible combination andcalculate the best result. This can work fine, but with real worldproblems, the number of combinations is so large that this approach isnot practical given a reasonable time scale.

[0010] Numerical calculator optimization techniques have been used toattempt to solve optimization problems and are now available in mostadvanced spreadsheet programs. But these techniques have limitations.For example, they lend themselves to optimizing independent numericinputs from which a desired output is calculated. They are less capableof optimizing problems involving sequencing or scheduling. Also, theyare “exploitation” and not “exploration” techniques. This means thatgiven a reasonable starting solution (a set of input values), thenumeric optimization will converge to a near optimal solution. However,they are not capable of exploring areas of space where good solutionsexist. This is because numerical optimization techniques can often gettrapped in local optimal solutions. Another limitation of numericaloptimization techniques is that they are not suitable if the outcomecannot be explicitly calculated. For example, when the outcome is asubjective assessment by an expert or an observed performance.

[0011] Another approach is the use linear program techniques. These canwork well when optimizing the numeric parameters of a recipe typeproblem. However, with the particular type of optimization problemrelated to investment account selection, it becomes very difficult torepresent the problem in terms of linear numeric parameters. Also, asthe number of parameters and equations increase, the calculations andsolution surface become extremely complex. Further, false optimumsolutions are prevalent, with no clear indication of recognizing thefalse solutions.

[0012] None of these approaches help to find an optimal solution in areasonable amount of time (both real time and computer time).

SUMMARY OF THE INVENTION

[0013] The present invention comprises an investment location optimizer.Once an investor or investment advisor determines the appropriate assetallocation (investment mix) and that there are both taxable accounts andtax-deferred investment accounts, the invention will optimize/maximizethe investor's ending after-tax asset accumulation, which is theobjective of all investors. This is accomplished by allocating thechosen investment vehicles between the taxable and tax-deferred accountsin an optimum way.

[0014] The present invention includes a system for determining aninvestment strategy for an entity with assets in taxable and tax-freeaccounts. It includes an account information input component, to acceptinformation regarding the assets in the taxable and tax-free accountsfor the entity; an investment selection input component, to acceptinformation regarding a plurality of investments, including anindication of a percentage amount to invest in each of the plurality ofinvestments; an account amount selection component, to select an amountto invest from the taxable accounts and tax-free accounts in theplurality of investments which substantially matches the indication of apercentage amount to invest in each of the plurality of investments; anda time horizon input component, to accept an indication of a timehorizon. A return on investment calculation component, then calculates areturn on investment for the entity based on the information regardingthe assets, the information regarding a plurality of investments, theindication of a percentage amount, the selected amount to invest fromthe taxable and the tax-free accounts, and the indication of a timehorizon. The account amount selection component selects an amount fromthe taxable and tax-free accounts in order to produce a maximal returnon investment for the entity at the time horizon.

[0015] In one embodiment, the account amount selection componentrandomly selects amounts from the taxable and tax-free accounts, and thereturn investment calculation component calculates a return for theentity based on the randomly selected amounts. The steps of randomlyselecting amounts from the taxable and tax-free accounts and calculatinga return are performed a plurality of times, and the system outputsselected amounts from the taxable and tax-free accounts which produce amaximal return.

[0016] In another embodiment, the account amount selection componentselects an amount from the taxable and tax-free accounts using GeneticAlgorithms (GA) in order to produce a maximal return on investment forthe entity at the time horizon. This embodiment includes a chromosomestructure, for use with the Genetic Algorithms, wherein the chromosomestructure includes a plurality of values, each value being an indicationof an amount from the tax-free accounts to invest in a selected one ofthe plurality of investments.

[0017] Advantages of the present invention include optimization ofinvestment outcome when there are two basic kinds of investoraccounts: 1) taxable accounts and 2) tax-free accounts such as Rothaccounts. In addition there are other kinds of investor accounts withtheir own unique tax characteristics that can be incorporated into thepresent invention. This would provide a broader and far more complexselection optimization.

[0018] The present invention rose from the need to help make optimaldecisions for clients and investors. The total asset accumulation in aninvestor's portfolio over time will vary dramatically depending on thedecision of which account to invest in which asset class. Through theuse of the present invention, the inventors are able to increase theterminal portfolio value typically between 5 and 40% with no increase inrisk to the investor. The risk lies with the asset allocation andspecific investments selection not where they are located. All relevantvariables have been incorporated into the present invention in order totruly optimize the end period accumulations.

[0019] The illustrative embodiment of the present invention comprises ahybrid GA-Heuristic search strategy. The hybrid approach is reflectedboth in the implementation of the GAs and the methodology of applying itto solve problems.

[0020] In broad terms, the following are the five steps to determine theoptimum investment portfolio for each client, as outlined in FIG. 1.Fact gathering 20 includes setting goals, identifying risk tolerance,making retirement projections, agreeing on the appropriate time horizonsand identifying the available investments. The next step is AssetAllocation 22. Studies show that 50 to 90% of total pre-tax returns aredetermined by asset allocation. Given the results of the fact findingphase 20, determining the appropriate mix between stocks (domestic,international, small cap, large cap), bonds (short-term, long-term,domestic, international, tax exempt), and cash which makes the mostsense for them is among the most important decisions in the investmentprocess.

[0021] In the step of Investment Selection 24, investors choose amongthe available investment options in each asset category to fund theasset allocation chosen in Step 22. The investor will select from theavailable mutual funds or individual stock, bonds and money marketinstruments. Then there is Account Selection 26, which includesdetermining which accounts (retirement/tax free, non-retirement/taxable,children, trusts, etc.) are best suited for the investments and assetallocation determined in Steps 22 and 24. These accounts are all taxeddifferently. Accordingly, this decision is primarily tax motivated withthe objective of maximizing the after-tax accumulations over time.

[0022] Finally there is Monitoring 28. After implementation the ongoingmonitoring of the portfolio is essential as circumstances change.

[0023] With regard to Step 26 Account Selection, there is no standardsystem or formula for allocation. It is here that investors andfinancial advisors need to make the complex decisions about in whichaccount to place which investment. There are a great number of variableswhich impact the account selection decision. They include the timehorizon, current and future tax brackets (both state and federal),current and future capital gains rates, relative spread between bonds(municipals, federal, corporate), portfolio turnover, investment yieldsand appreciation rates, and relative proportion of overall portfolio inaccount types (retirement, non-retirement, children, trusts).

[0024] The illustrative embodiment of the present inventionsimultaneously takes into account the following variables: Federal taxesincluding income taxes (8 brackets) and capital gains taxes (3brackets); States taxes including income and capital gains taxes(different in all 50 states and many have multiple brackets); Investmentcharacteristics of numerous asset classes which are defined in terms ofincome characteristics (including taxable, tax-exempt, growthcharacteristics and turnover); time horizon (in years); before and afterliquidation values; proportion of assets in taxable and tax-freeaccounts; and relevant investment mix.

[0025] Advantages of the present invention include a marked level ofimprovement in outcome from the application of the present invention.Typically the improvement is in the 5-40% range over 20 years. This issignificant, and remember, it is a complete freebie. This is, the endresult of the investment process is improved significantly, with noincrease in risk as it is the same investments just in better locationsfrom a tax stand point. And, as previously discussed, the means ofachieving an optimum solution is not available by any other means.

BRIEF DESCRIPTIONS OF THE DRAWINGS

[0026] The foregoing and other features and advantages of the presentinvention will be more fully understood from the following detaileddescription of illustrative embodiments, taken in conjunction with theaccompanying drawings in which:

[0027]FIG. 1 is an outline of steps in an investment process;

[0028]FIG. 2 is a block flow diagram generally showing informationinflow and outflow to a system according to the present invention;

[0029]FIG. 3 is a block diagram showing a more detailed flow ofinformation as compared to FIG. 2;

[0030]FIG. 4 is a block diagram showing an investment optimizingcomponent according to one embodiment of the present invention;

[0031]FIG. 5 is a block diagram of a computer system according to oneembodiment of the present invention;

[0032]FIG. 6 is a user interface input screen for entering entity dataaccording to an illustrative embodiment of the present invention;

[0033]FIG. 7 is a user interface input screen for entering investmentdata according to an illustrative embodiment of the present invention;and

[0034]FIG. 8 is a user interface output screen for displaying resultsaccording to an illustrative embodiment of the present invention.

DETAILED DESCRIPTION

[0035]FIG. 1 outlines steps used in planning an investment strategy foran entity, such as a person. Fact gathering 20 includes setting goals,identifying risk tolerance, making retirement projections, agreeing onthe appropriate time horizons and identifying the available investments.The next step is Asset Allocation 22. Studies show that 50 to 90% oftotal pre-tax returns are determined by asset allocation. Given theresults of the fact finding phase 20, determining the appropriate mixbetween stocks (domestic, international, small cap, large cap), bonds(short-term, long-term, domestic, international, tax exempt), and cashwhich makes the most sense for them is among the most importantdecisions in the investment process.

[0036] In the step of Investment Selection 24, investors choose amongthe available investment options in each asset category to fund theasset allocation chosen in Step 22. The investor will select from theavailable mutual funds or individual stock, bonds and money marketinstruments. Then there is Account Selection 26, which includesdetermining which accounts (retirement/tax deferred,non-retirement/taxable, children, trusts, etc.) are best suited for theinvestments and asset allocation determined in Steps 22 and 24. Thisdecision is primarily tax motivated with the objective of maximizing theafter tax accumulations over time.

[0037] Finally there is Monitoring 28. After implementation the ongoingmonitoring of the portfolio is valuable as circumstances change.

[0038] Focusing on Step 26 Account Selection, there is no standardsystem or formula for allocating investment funds from taxable andtax-deferred accounts. It is here that investors and financial advisorsneed to make the complex decisions about in which account to place whichinvestment. There are a great number of variables which impact theaccount selection decision. They include the time horizon, current andfuture tax brackets (both state and federal), current and future capitalgains rates, relative spread between bonds (municipals, federal,corporate), portfolio turnover, investment yields and appreciationrates, and relative proportion of overall portfolio in account types(retirement, non-retirement, children, trusts).

[0039]FIG. 2 illustrates an asset allocation optimizer 36 according tothe present invention. An illustrative embodiment of the presentinvention starts with a predetermined Asset Allocation 30. This includestaxable assets and accounts 32 and tax deferred assets and accounts 34.Typically, these asset allocations 30 are pre-divided into variouscategories. For example, an entity (such as a person or business entity)may have funds in a taxable account, where taxes are due each year; anda tax-deferred, where taxes on the principal and/or interest are not dueuntil the funds are withdrawn, or the individual reaches a certain age.The types of accounts for which the present invention is applicableinclude Taxable, IRA, 401K, Keough, Roth IRAs; trust accounts;foundations; corporate charitable trust accounts; children's accounts.

[0040] While these funds are in different accounts 32 and 34, they maybe invested in different investments. A feature of the present inventionis determining which accounts to use for each investment that results ina maximum after-tax accumulation.

[0041] These predetermined asset allocations 30 are provided as inputinformation into an investment location Optimizer 36. Other informationinput to the investment location Optimizer 36 includes investmentcharacteristics 38. As detailed in FIG. 3, investment characteristics 38include details about the various selected or potential investments,including ordinary income, yield, percent tax, long term capital gaindistributions, unrealized appreciation, and investment turnover. Thisinvestment characteristic information 38 is specific to each investment.Such information may be stored in a separate database, or enteredspecifically for a specific entity.

[0042] Other information entered into the investment location Optimizer36 includes tax rates and time horizon information 40 which generally ispeculiar to the individual entity. Such individual information 40includes the federal income tax rate, state income tax rate, capitalgains tax, tax deferred investments (accounts) and total investments forthe individual. Other information includes the time horizon which is theperiod of which to determine the maximal growth. The investment locationOptimizer 36, FIG. 2, then determines an optimized solution which is anoutput 42 in the form of an optimized accumulation 44. This informationis similar to the original investment location information 30, exceptthat now the amount of taxable investment accounts 46 and tax deferredinvestment accounts 48 are selected to produce an optimal result at theend of the time horizon. Other information, including the projectedinvestment value at the time horizon, and percentage improvement, may beoutput, as will be discussed below.

[0043] The investment location optimizer 36, FIG. 4, includes two majorcomponents in the illustrative embodiment of the present invention. Anaccount amount selection component 50 receives as input thepredetermined investment location 30 and works to adjust the properinvestment location to produce an optimal solution. Another component isthe return on investment calculating component 52. This return oninvestment calculating component 52 performs calculations to determinethe value of the various investment over the time horizon. Thereforethis return on investment calculating component 52 accepts input of theinvestment characteristics 38 as well as information from the accountamount selection component 50 as shown by arrow 54. The return on theinvestment calculating component 52 performs standard calculations fordetermining growth based on interest, turnover, mean variance analysis,and other features of an investment, including the tax characteristics.The information returned by the return on investment calculatingcomponent 52 is provided as feedback 56 to the account amount selectioncomponent 50, thereby allowing it to receive feedback on variousoptimizations and determine an optimal solution.

[0044] The output 42 from the account amount selection component 50 isin the form of the optimized investment locations which are returned tothe user of the system.

[0045] A computer system for running an embodiment the present inventionis shown in FIG. 5. A user may interact with the system using aworkstation or other display, to input information and run the system. Acomputer system including a user interface application interacts withthe user, and stores information regarding accounts and assets in adatabase. The optimization system interacts with the database toretrieve and store information. The optimization system also mayinteract directly to the user, either directly or through the userinterface application or system.

[0046] One embodiment of the asset allocation optimizer 36 uses MonteCarlo simulation to determine an optimized allocation. The accountamount selection component 50 generates ranges of percentages of taxablevs. tax-deferred accounts to invest in particular investments. Then thesystem randomly selects percentages within those ranges, whereupon thereturn on investment calculating component 52 determines the resultsbased on the randomly selected percentages. This cycle is repeated manytimes, with the system remembering the best result. The selection ofrandom percentages can be adjusted depending upon the selection process,for example random selections within the range can be uniform(pseudo-random), or skewed, such as logarithmic over the range, or overa normal distribution curve.

[0047] An advantage of the Monte Carlo technique is that it can also beapplied to variable yields for various investments. For example, aninvestment stock may have a projected yield, but more likely it willvary over time. The present invention allows investment yield (and otherparameters) to be entered as a range, instead of as a specific return.This range can be defined so that random values selected within therange are even distribution, bell curve, stepped, skewed, etc. By usingMonte Carlo techniques to factor in volatility of one or moreinvestments and generate realistic samples of the results, a betteroptimized allocation is produced. Further, results can include a “bestcase” and “worst case” result, which allows for more prudent allocationdecisions.

[0048] The Monte Carlo technique may be used alone, or in combinationwith other optimization techniques, including the GA (Genetic Algorithm)embodiment described below. For example, the Monte Carlo technique isuseful for selecting randomly distributed samples used to “seed” thegene pool for GA fitness and cross-breeding evaluations. In other words,to improve the account selection starting point of the presentinvention.

[0049] The illustrative embodiment the present invention uses GeneticAlgorithms (GA) to help select an optimized investment allocation. GAsare techniques for solving optimization problems inspired by the theoryof evolution and biogenetics. These algorithms are useful for exploringlarge search spaces for optimal or near optimal solutions. The basics ofa genetic algorithm are:

[0050] 1. Representing possible solutions to problems as a string ofparameters (numbers). This string is called a chromosome and theparameters within it are called genes.

[0051] 2. Randomly creating a number (generation) of these chromosomes.

[0052] 3. Calculating the effectiveness of each chromosome as a solutionto the problem then ranking the chromosomes in order of effectiveness(fitness to survive).

[0053] 4. Creating a new generation of chromosomes by randomly selectingpairs of chromosomes (parents) and mixing their genes to form childchromosomes. This process is called ‘crossover’ and the selection of theparents is biased to more effective (fit) parents. Another variationcalled ‘mutation’ involves randomly changing one or more genes within achromosome. Mutation helps GA systems to avoid false solutions andtoo-narrow convergence on one area of the search space.

[0054] 5. Repeating steps 3 to 4 for a number of cycles (generations).

[0055] The randomness of the above process allows the effectiveexploration of the space of solutions. While the selection of effectivesolutions (chromosomes) and the mixing of their genes allows theaccumulation of good features from partially good solutions. As aresult, genetic algorithms can explore large domains and converge ongood solutions relatively quickly. GA's also give a powerful trade offbetween the time taken to reach a solution and the quality of thesolution.

[0056] The two basic steps in developing solutions using GA's are anappropriate representation of the problem and a method of assessing theeffectiveness (cost) of a solution. The easiest representation of aproblem for GA implementation is as a string of numbers. Each number isrepresented by a gene that can be constrained by the minimum and maximumvalues it can take. A cost function is defined which derives a value forthe cost of the solution from a given set of gene values. In such arepresentation, each gene represents a different numeric parameter ofthe solution. Alternatively, a chromosome can be used to represent asequence of jobs which requires optimization. In such a case the numberof genes will equal the number of jobs to be sequenced and the value ofeach gene will be unique and range from 1 to the number of tasks.

[0057] The genetic structure used in the illustrative embodiments asingle non-sequence chromosome, named TaxDeferred with a variable numberof genes, ACTD (Asset Class Tax Deferred).. Each asset class isrepresented as a gene containing the dollar value in tax deferredaccounts on this chromosome. That is, the GA component generates valuesfor the amount in tax deferred accounts for all asset classes, and thecost function written for this application computes both the amount intaxable accounts and the total value for that allocation to taxable andtax deferred accounts. There is applied a sum constraint which requiresthat the total tax deferred dollars in all genes must add up to thetotal tax deferred dollars specified by the user. The fitness is themeasure of the value at the time horizon.

[0058] As previously mentioned, in the illustrative embodiment theinitial chromosome is initialized to a set of values that represent thecurrent value in tax deferred accounts in order to provide a reasonablestarting point for the optimization. By utilizing current values, theillustrative embodiment converges to an optimal solution within onegeneration (initial chromosome “pool” created by mutation, and ageneration “pool” including crossover). Experiments using two and sevengenerations showed some improvement over using one generation, with atradeoff in increased time for computation. Multiple generations may beused for incremental improvements to an optimal solution, or if thecurrent values are not already “optimized” in that the accounts wereselected by a naive investor. Therefore the present invention works bothfor experienced investors and, advisors as well as naive users and maybe adjusted accordingly for specific investor types.

[0059] The illustrative embodiment of the present invention isimplemented using Microsoft Access 97 and XPERTRULE KBS by AttarSoftware. However, any database could be used for this purpose as couldany heuristic problem solving algorithm. The illustrative embodimentruns on a general purpose computer such as an Intel® based processorrunning a standard operating system such as Microsoft Windows® or Linux.However, the present invention can run on any type of computer system,mainframes to palm computers, or on calculators such as financialcalculators. Further, the present invention may be available locally orremotely to users over a network based system such as the internet ormodem connections. For example, users can access a web site (eithergenerally or with a personal account number), enter information and runthe optimizing system. Users can also store their personal informationin secure accounts at the web site.

[0060] A full description of the specific GA system used to implementthe illustrative embodiment can be found the XPERTRULE Reference ManualRelease 3.63, as provided by Attar Software Limited, and is fullyincorporated herein by reference. Software applications fall into twocategories; analysis and synthesis. Analysis applications arerepresented by the traditional input/output model of data processingwhereby input data is processed procedurally or heuristically togenerate the output data. Synthesis applications involve the reverseprocess of deriving the input data required to generate certain desiredoutputs. This is a difficult task since there are, in most cases, noformulae or rules to derive inputs from outputs. This is furthercomplicated by constraints imposed on the acceptable values of inputdata. Optimization is the process of deriving values of input data thatsatisfy constraints and which results in the desired output data.

[0061] The GA component of the illustrative embodiment first computesthe portfolio value given the current location of assets between taxableand tax deferred accounts, and stores this for comparison to the finalvalue determined to be best by the cost function.

[0062] The GA component then initializes the GA to a set of values thatrepresent the current value in tax deferred accounts in order to providea reasonable starting point for the optimization. This is not necessaryto reach an optimal value, but it seems to speed up the processconsiderably. In the illustrative embodiment, a first iteration (orpool) of chromosomes is performed for fifty iterations. The iterationsdiffer through random changes (mutations) in the chromosome. Ageneration is then created, using random crossovers with another set of50 iterations. This cycle may be repeated as desired.

[0063] Now, given a particular set of values of tax deferred dollars ineach asset class, the value function determines the total value of theportfolio. If this value is better than previous values, then it isretained as the best solution so far, otherwise, it is discarded.

[0064] Computations used by the value function in the illustrativeembodiment to reach its conclusions are listed in Appendix A, includingvaluation functions to compute the future value of various investmentsincluding stocks and bonds. For the illustrative embodiment, the GAcomponent writes its conclusion to a file.

[0065]FIG. 6 illustrates a user interface front end for use with anillustrative embodiment of the present invention. As shown in the inputwindow 64, information including an account identification, and abusiness or individual indication are entered along with the first andlast name and age of the entity. This information may be saved in adatabase to allow future recall and changes. Other information which maybe used in calculations or simply for data base entry are also entered.Allocation data including the total assets available and the totalassets in a tax deferred account are input along with the (combined orseparate) federal and state tax rate for the individual. An optimizationmethod may be entered including after liquidation are also entered.Finally, the time horizon in years is also entered on this screen 64.

[0066] Clicking on the button marked ‘Asset Class’ brings up thefollowing form 66 as shown in FIG. 7, on which the Clients' variousassets are entered along with the current Taxable/Tax Deferredallocation. There are possibly many user-defined asset classes whichgenerally fall into one of two types: Stock or Bond. For each assetclass, the user may enter or select the following data: percent taxed byfederal and state governments; ordinary income (dividend) percent; yieldpercent for bonds; long term capital growth distribution; anticipatedunrealized appreciation; percent and amount to be allocated to eachasset class; percent and amount currently allocated to taxable and taxdeferred accounts; average turnover time; and capital gains tax rate.

[0067] Also entered at this stage is a preliminary allocation betweenthe various investments which is shown by label 68. Here, there is apercent allocation between the various investments which will equalapproximately 100%. The illustrative embodiment will also calculate theinvestment amount based on the total assets available based on thepercentage as shown by label 70. Alternatively, the amount entered maybe entered in monetary units wherein the percentage will be calculatedautomatically. Finally a current allocation between taxable and taxdeferred accounts is entered 72. This provides a starting point for theoptimization process and further will provide an ability to view howmuch the optimization has provided for.

[0068] When the user clicks the “Optimize” button on the user input oredit screen 64 FIG. 6, the appropriate data is sent to the optimizingsystem. In the illustrative embodiment, data is written to an ASCII textfile by the database, and are subsequently read by the optimizingsystem. In subsequent versions, OLE 2 or other protocols may be used fordata communication. Prior to optimization, some calculations are done toprepare the data for optimization. This code, written using XPERTRULEKBS, is shown in Appendix A.

[0069]FIG. 8 shows the result screen 74 which presents the output fromthe optimization process. As shown by label 76 for the present example,the investment allocation optimization system was able to provide an 11%improvement over the current strategy with a time horizon extending outto March of 2039. As output by the system, the data as shown by label 78is a new allocation between the taxable account and tax deferred accountwhich provides more value at the time horizon. In performing thesecalculations, the optimization system maintains the limits as providedby the account data, for example if an entity wants to invest 25% in aparticular investment, then there is not enough assets available in atax deferred account to fully fund 25% then assets will be distributedfrom the taxable account to make up the difference. An improvement uponthis strategy, is to provide suggestions to the entity to provide morefunds available in their tax deferred account should that person's taxsituation allow for such a move.

[0070] The illustrative embodiment of the present invention was testedwith data to check the hypothesis of Evensky, as discussed in thepreviously cited Wall Street Journal article. Evensky recommendedkeeping stocks in taxable accounts and bonds in tax-deferred accounts. Ascenario was run using data of $200,000 total assets, with $100,000 intax-deferred accounts. The federal tax rate was 42% and state tax rate6%, with a horizon of forty years. Two investments were entered, a bondinvestment returning 6%, and a stock investment returning 13%. Thescenario was started with all the tax-deferred assets (50%) in the bondinvestment, and all the taxable assets (50%) in the stock investment,thereby following Evensky's advice. The results from running the systemwas very different. The illustrative embodiment instead computed thatputting all the taxable assets in the bond investment, and all thetax-deferred assets in the stock investment would results in a growth invalue to $7,281,432, which was a 94% improvement over the initialallocation. Therefore, for the example tested here, Evensky's hypothesisis clearly not the best investment strategy.

[0071] The present invention includes additions and enhancements whichprovide more utility for investors and analysts. These additions includedifferent optimization techniques and algorithms, including rule-basedexpert systems, neural net processing to recognize patterns and learnoptimization techniques, fuzzy logic, linear programming, exhaustivesearch, and various combinations thereof.

[0072] Further, different types of accounts may easily be added to thepresent invention, including Roth IRA, annuities, various trusts, 401k,custodial accounts, 529 investment plans, corporate accounts, etc.Specific investment or class of investments characteristics may beadded, for example the system can optimize the type of bond: —i.e., ifbonds are best suited for retirement account, then use 6% yieldingcorporate bonds, if best suited for taxable account and tax bracket≧28%, use 4% municipal bonds.

[0073] Details for other types of accounts include:

[0074] ROTH IRA—investments accumulate within a ROTH (popular retirementaccount) tax-free and assuming certain rules are met (i.e. nowithdrawals allowed prior to age 59.5 without penalty) distributionscome out tax-free. Furthermore unlike most other retirement accounts,there is no required distribution beginning date of age 70.5. As aresult the system can determine whether makes sense to put an investor'shighest total returning investment in a ROTH to enjoy maximum long-termaccumulation.

[0075] ANNUITIES—investments within an annuity accumulate on atax-deferred basis like most retirement accounts. The major differencesare the required distributions begin later (age 85 or 90 versus 70.5)and only the earnings are taxed as ordinary income as opposed to theentire distribution being taxable with normal retirement accounts. Anannuitant recovers tax-free the potion of his payouts that represent hisoriginal purchase price on the annuity. System inputs for this type ofaccount include the cost of the annuity and the anticipated beginningpayout date. For example an investor may have purchased an annuity for$10,000 (input) and its value is currently $14,000 (input) with ananticipated beginning payout date in 7 years (input). Depending uponwhich investment is optimally located in the annuity it will haveaccumulated to a certain amount by the time of the first distribution.If for example the value of the annuity at that time were $50,000 thenroughly 80% ($40,000 earnings as a % of value) would be taxable.

[0076] Note that there is a limit as to which investments are availablewithin any particular annuity. Individual stocks can not be purchased bylaw in an annuity. Each annuity product has mutual fund-like subaccounts. Some have a large number to pick from and others a verylimited number. Accordingly as another input for all investments is ablock put on any investment not available within any annuity theinvestor has. The system would not consider that investment as beingavailable for that annuity in the optimization process.

[0077] NON-DEDUCTIBLE IRAs & OTHER POST-TAX RETIREMENT ACCOUNTS—aretaxed in roughly the same way as annuities except they are required tobegin distributions at age 70.5 (versus 85 for annuities). An additionalinput would then be the investor's non deductible contribution in thistype of account. Distributions at 70.5 (per preprogrammed IRS tables)have a tax-free return of principal component to them.

[0078] TRUSTS—an investor may consider investments within a trust partof the overall family portfolio. Trusts may be taxed differently thanother taxable accounts in an overall portfolio. For example, the topmarginal federal tax rate of 39.6% is reached at roughly $280,000 forindividuals with the first $30,000 only being taxed at 15%. For mosttrusts, 39.6% is reached at roughly $10,000 (capital gains taxes may bethe same rate for either (currently 20%)). Accordingly a trust might bein a much higher tax bracket than an individual for ordinary incomeitems and a high ordinary income investment like a corporate bond may bebetter located in an individual's account rather than a trust.Accordingly, an additional input for each trust is how it is taxed.

[0079] Note that appreciation of securities in trusts may never be taxedunder certain circumstance. For example a charity may get the assets atsome future date. An additional input would shut down the relatedcapital gains tax on investments within that trust.

[0080] CHILDREN'S ACCOUNTS—an investor may consider investments taxableto a child as part of the overall family portfolio. Accordingly, the taxrates applicable to other family members accounts is an additionalinput. A child may be subject to a different tax rate for both ordinarytaxes as well as capital gains taxes.

[0081] EDUCATIONAL ACCOUNTS—may be taxed differently depending uponwhich IRS allowed plan an investor uses. Some plans are tax deferreduntil distributions are made and then taxed entirely at the recipientsordinary tax rates.

[0082] CORPORATE ACCOUNTS—investments are sometimes located insidecontrolled corporations and are then subject to corporate tax rates.

[0083] Other features are easily integrated, for example a foreign taxcredit feature may be added, wherein the foreign tax credit can only betaken in taxable accounts as an additional input. Foreign countriesoften assess taxes on investment income of US citizens. To mitigate theinequity of double taxation the federal government allows a credit on anindividual's tax return for foreign taxes paid in a taxable account.There is no such credit given in retirement accounts. Accordingly, aninput to help determine the optimal location of investments is thedollar amount of the expected credit for all foreign investments.Alternatively the input is expressed as a % of the value of theinvestment. The system then factors in the tax savings of the credit ifheld in a taxable account. This would obviously impact the long-termaccumulations that the system is optimizing. Whether it is worthwhile toforego the credit and hold the investment in a retirement account wouldbe a function of the many other variables input.

[0084] Another embodiment of the present invention is for initialoptimization for the type of bond. One embodiment of the presentinvention takes given investments and searches for the best accountlocations to maximize long-term accumulations. However, the investmentsmight change. An investor may have a corporate bond that pays 6% peryear in interest. If it were held in a taxable account the interestwould be taxed at the investor's marginal rate of tax. In a retirementaccount it would be taxed along with all other components(contributions, capital gains etc.) of the account with the marginalrate of tax applied to the amount withdrawn, possibly in many years atthe investor's then marginal rate of tax. A tax-free municipal bond maybe the effective equivalent to a top-rated corporate bond in terms ofrisk etc. with the only substantive difference being interest yield.Because of the tax-free nature of municipal bonds, municipalities arealways able to pay less in interest than their taxable bondcounterparts. Accordingly, if a bond is to be held in a taxable account,investors will calculate whether a tax-free municipal bond would yieldmore than a taxable corporate bond would after the taxes are paid.Typically investors in the highest tax brackets will use municipal bondsfor their taxable accounts (no one ever holds municipals in theirretirement accounts, as they are not tax-free there). Therefore, eventhough x amount in bonds may be a given for an investor, the type ofbond chosen (taxable or tax-free) would normally be a function of itslocation (taxable account or retirement account) and the investors taxbracket.

[0085] If for example, an investor has committed to investing $10,000 inbonds and if held in a retirement account then a corporate bond will bepurchased which will yield 6%, if the bonds are held in a taxableaccount then based on the investors tax bracket of 36% they willpurchase a municipal bond paying 4% as 4% is greater than 3.84% which isthe after-tax yield on a corporate bond for this investor (6%×(1−36%).If the investor's tax bracket was 15% then the corporate bond would bepurchased regardless of where it is held as 5.1% (6%×(1−15%)) is greaterthan 4%.

[0086] An additional input for each bond is the taxable equivalent yieldfor each municipal bond (or bond fund) and the tax-free equivalent yieldfor each taxable bond. Alternatively the user simply inputs the general“spread” between taxable and tax-free bonds which the system applies toall bonds that are input. The system then optimizes the type of bond,calculating, based on a tax bracket input whether lower yieldingtax-free municipal bonds would be better for a particular investor. Insearching for the optimal location for the $10,000 in the bond exampleabove, the system would use 6% when trying retirement accounts and 4%tax-free for taxable accounts. These will obviously impact long-termaccumulation amounts and would also impact the optimal location ofbonds.

[0087] The output from the system would then be different for bonds.Other investments will simply advise to keep the investment where it isor to sell all or part of it in its current location and purchase thatamount in another account. A potential output with bonds for examplemight be to sell a corporate bond in a retirement account and then tobuy a different but substantially equivalent investment—a municipal bondin a taxable account (or vice versa).

[0088] The system would typically shut down federal income taxes onmunicipal bonds. State taxability will be an additional input.Generally, municipals are taxable in the state of residence unless theyare issued by that state and Federal bonds may be tax-free at the statelevel. A “check the box” input for federal and state taxability would beused.

[0089] Another embodiment of the present invention uses multiple timehorizons. For example, most people do not take their retirement accountsall out at once but rather spread out their withdrawals over a number ofyears. For example, they may wait until the IRS requires distributionsat age 70.5 and then withdraw based on IRS tables (i.e. {fraction(1/18)}th of account balance each year for the rest of their life).Alternatively, a ROTH IRA has no required beginning date and as aresult, may be the last investment an investor may draw down. In eithercase this keeps the tax deferred compounding going for potentially manymore years and as a result could impact which investments are bestsuited for the retirement accounts. Further, taxable accounts may alsohave different time horizons—for example an investor may be settingmoney aside for a child's education in 5 years. In a taxable account anyappreciation on a stock is taxed when sold. Placing investmentsoptimally is to a large extent dependent on the timing of taxation.Accordingly, if money from a college education account will be needed in5 years it is wiser to put a buy and hold stock in another account thatwill not be needed for 30 years. This would significantly delay thecapital gains tax on its sale. The time value of money of paying taxes25 years later would obviously enhance overall family net worth.

[0090] New inputs provide the anticipated date (or dates with amounts orpercentages of value) that each investment would be withdrawn. Theendpoint that defines optimization for example might be the maximumvalue at death, which are preprogrammed by life expectancy tables, asadjusted by the user. For families that may have an estate tax, then theaccumulation at death could be net of estate tax. Alternatively, forthose who might run out of funds prior to death, optimization aredefined as the maximum number of years that overall investments wouldlast. Note that the time horizons may be quite lengthy. Investments maybe passed to the next generation that may be named as beneficiary on aretirement account for example. Alternatively the investments may be ina trust for the benefit of a grandchild. Accordingly, there may be awide disparity in the time horizon of a family's investment accountsthat could have a material impact on the location of that family'sinvestments.

[0091] Another embodiment of the present invention provides forcrossover points. A user of the system might ask the question “how higha rate of return is necessary to justify moving a given investment fromone account to another?”. Often the highest total returning investmentshould be located in a retirement account but to move it from itstaxable account might involve paying current capital gains taxes as theinvestment in question has gone up in value. The system can trydifferent rates of return until it reached a different conclusion as towhere an investment should be located. The output will state “At a rateof return above 11% stock XYZ should be sold and repurchased in theretirement account, at a rate of 11% or below it should remain where itis”. The user can then make the decision whether or not to move XYZbased upon their judgement as to the likelihood of XYZ earning 11%. Thismay be much easier for the user than predicting a precise rate of returnon investments.

[0092] Similarly, there are other subjective inputs such as timehorizon, as previously discussed. It may be difficult for the user toknow how long the investments may be held prior to withdrawal. Forexample, there can be a tradeoff in some investments between paying taxalong the way at favorable rates in a taxable account or letting themgrow in a retirement account without tax interference for many years andthen be taxed at unfavorable rates (there are no capital gains ratesavailable in retirement accounts). Stocks may be a good example as thebulk of their return is from capital gains, which are taxed at apreferable rate of 20% when they are sold. Some investors may sellfrequently and may be better off letting this higher potential earninginvestment grow in a tax deferred environment where compounding may besignificant. The more frequent the sale and the further it is untilretirement the more attractive holding the stock in the retirementaccount may be. In this case the system will try different holdingperiods and different sale frequencies. The output will state “If theholding period is greater than 7 years move the investment to theretirement account, 7 years or less leave it in the taxable account” or“if the stocks are to be sold any more than every 3 years, they shouldbe held in a retirement account”.

[0093] There are other subjective inputs that the system can calculatecrossover points for example—“How high could tax rates go up beforetaking advantage of low current capital gains rates by keeping stockinvestments in taxable accounts would be the better choice?”

[0094] Crossover points for more than one variable at a time ispossible, but more involved. The system goes through its normaloptimization process with finite inputs. Then for the non-factualinputs, the system changes them until the conclusion changed (theremight also be a graphical representation of the crossover points). Thisis then reported to the user who might then decide to change the inputon that assumption. The system then goes on to the next subjectiveinput. This iterative process continues until the user was satisfiedthat the optimal solution was achieved. For example—input 11% (bestguess) for stock XYZ, system says leave it where it is in the taxableaccount, system then indicates through its crossover function that ifreturn was greater than 11.8% it should be sold and repurchased in theretirement account. The user may be confident that the stock will earnat least 11.8% and will change the input for this investmentaccordingly. This moves the investment into the retirement account. Nextthe system address holding period for example, etc..

[0095] Other optimization thresholds and variations are available,include an age 70½ (minimum required distributions), post-retirementinvestment location optimization. Another optimization is crossoverpoints for all the variables that trigger when one account is betterthan another. Another optimization is differing time horizons forvarious accounts. Also, different beneficiary designations on retirementaccounts can be factored in, i.e., Roth IRAs distributions could bedelayed beyond the owner's death.

[0096] Other features of the present invention include input and outputof information in standardized formats, for example the Morningstar's orStandard and Poors etc. databases, allowing tie-ins for fund/individualsecurity data such as past returns, turnover, dividend yield, etc.Support for databases and/or spreadsheets of optimized portfolio as wellas current portfolio is helpful. Other support includes cash flowanalysis, with integration of projected cash flow needs to determinetime horizons for various investment accounts, and to integrate withexisting software programs that calculate retirement projections oroptimal investment mixes etc. Other features include a separateapplication which integrates into other standard systems, to extract thenecessary information and produce results with minimal data entry.

[0097] Other features include estate sensitivity, with no taxation onappreciation if assets passed via an estate; gifting, with implicationswithin family at different tax brackets, or to charity to escapetaxation on appreciation; tax basis, with current tax basis and relatedtax bite to be factored in when determining optimal account location;and tax-loss deductibility, to be factored in if securities decline invalue; different tax rates for different time periods; alternativeminimum tax if applicable. Obviously, as tax laws change, newoptimization features will become useful with the present invention. Thesoftware could also accommodate entirely different tax systems fromother countries, along with exchange rates as necessary.

[0098] Other features include a “solve it” function, for example todetermine what minimum rate of return is needed before stock should bein retirement account or any other variable in the program; simultaneousoptimization of asset allocation with investment location; factoring inof ongoing cash inflows and outflows, a rebalancing feature, which tiesin anticipated rebalancing needs with current optimizations; and a taxefficiency calculator, to determine for example how much greater of aninvestment return does Fund A need to offset its tax inefficiency whencompared to Fund B.

[0099] The present invention also solves additional problem areas asfollows:

[0100] Optimal Mortgage—Difficult decisions between fixed versusvariable, points versus no points, 15-year versus 30-year, are alldependent on a number of personalized assumptions—there are cross overpoints.

[0101] Optimal Account to Pay Investment Fees From—Investors who payadvisory fees often have many accounts which could be used to pay them.If paid from taxable accounts the fees may be deductible or perhapspartially deductible. If paid from retirement accounts the fees willreduce the eventual taxable distributions from those accounts at theprice of reduced long-term tax-deferred compounding. There are crossover points.

[0102] Optimal Beneficiary Designations—Naming beneficiaries who areyounger than your spouse can significantly increase long-termtax-deferred compounding. However, your spouse may not have enough tolive on should you predecease them.

[0103] Annuity Optimizer—Optimization is a function of higher cost ofthe annuity and loss of capital gains benefits versus tax-deferredcompounding through later required pay out dates and the ability toannuitize.

[0104] Optimal Time to Rebalance a Portfolio—The trade off betweentransaction costs and taxation versus increased volatility/risk andadherence to an investment policy can be optimized.

[0105] Estate Planning—This is perhaps the most complex financial issuefacing individuals because there are such a wide range of possibleobjectives and a wide range of means to achieve these objectives. Thisproblem shares the basic characteristics of the investment locationproblem: it is bounded by the tax laws and is therefore optimizable.

[0106] Optimizing The Use of Stocks Versus Stockfunds—Factors includerelative expenses, diversification issues, tax planning (i.e.,harvesting losses), step-up in basis issues, charitable gifting, etc.

[0107] Retirement Optimizer—Answering the reverse of the investmentlocation question, this solution will analyze an investor's portfolioand determine a schedule of optimal distributions from tax-deferred andtaxable investment accounts, factoring in liquidity needs, age 70½minimum required distribution rules, tax basis, etc.

[0108] Roth IRA Optimizer—Whether or not to convert an existing IRA to aRoth is subject to a number of factors, some of which are qualitative.

[0109] Education Funding Optimizer—Optimizes a parent's fundingalternatives between U-Plans, UTMA accounts, Educational IRAs,Educational Trusts, etc., factoring many issues including taxation,investment performance, financial aid, as well as qualitative factorssuch as control over investments.

[0110] Stock Option Optimizer—Employees often own various types of stockoptions with a variety of restrictions impacted by tax laws and oftensubject to significant fluctuation in value. The optimizer would presenta schedule of which options to buy/exercise/sell and when. Risktolerance and stock volatility would be factored in.

[0111] Life Insurance Optimizer—Whether to purchase term or cash valueand if cash value, which type is a complicated issue which isoptimizable.

[0112] Although the invention has been shown and described with respectto illustrative embodiments thereof, various other changes, omissionsand additions in the form and detail thereof may be made therein withoutdeparting from the spirit and scope of the invention.

What is claimed is:
 1. A system, for running on a computer, fordetermining an investment strategy for an entity with assets in taxableand tax-free accounts, comprising: an account information inputcomponent, to accept information regarding said assets in said taxableand tax-free accounts for said entity; an investment selection inputcomponent, to accept information regarding a plurality of investments,including an indication of a percentage amount of said assets to investin each of said plurality of investments; an account amount selectioncomponent, to determine an amount to invest from said taxable accountsand tax-free accounts in each of said plurality of investments, whereinsaid determined amounts substantially matches said indication of apercentage amount to invest in each of said plurality of investments; atime horizon input component, to accept an indication of a time horizon;and a return on investment calculation component, to calculate a returnon investment for said entity based on said information regarding saidassets, said information regarding a plurality of investments, saidindication of a percentage amount, said selected amount to invest fromsaid taxable and said tax-free accounts, and said indication of a timehorizon; wherein said account amount selection component determines anamount from said taxable and tax-free accounts in order to produce amaximal after-tax accumulation for said entity at said time horizon. 2.The system of claim 1 wherein said account amount selection componentrandomly selects amounts from said taxable and tax-free accounts, andsaid return on investment calculation component calculates an after-taxaccumulation for said entity based on said randomly selected amounts. 3.The system of claim 2 wherein steps of randomly selecting amounts fromsaid taxable and tax-free accounts, and calculating a return, areperformed a plurality of times, and said system outputs selected amountsfrom said taxable and tax-free accounts which produce a maximal return.4. The system of claim 1 wherein said account amount selection componentselects an amount from said taxable and tax-free accounts using GeneticAlgorithms (GA) in order to produce a maximal return on investment forsaid entity at said time horizon.
 5. The system of claim 4 furtherincluding: a chromosome structure, for use with said Genetic Algorithms,wherein said chromosome structure includes a plurality of values, eachvalue being an indication of an amount from said tax-free accounts toinvest in a selected one of said plurality of investments; and saidreturn on investment calculation component calculates an after-taxaccumulation for said entity based on said values in said chromosomestructure.
 6. The system of claim 1 further including: a personal taxcomponent, to accept information regarding personal tax rates for saidentity, wherein said a return on investment calculation componentcalculates a return on investment for said entity based on saidinformation regarding said personal tax rates.
 7. On a computer system,a method of determining an investment strategy for an entity with assetsin taxable and tax-free accounts, said method comprising: receivinginformation regarding a plurality of investments; receiving informationregarding a percentage amount of said assets to invest in each of saidplurality of investments; receiving information regarding a timehorizon; and for each of said plurality of investments, determining anamount to invest from said taxable and tax-free accounts in saidinvestment, wherein said determined amount to invest substantiallymatches said percentage amount to invest in said investment; whereinsaid determinations will produce a substantially maximal after-taxaccumulation for said entity at said time horizon.
 8. The method ofclaim 8 wherein said step of determining an amount to invest from saidtaxable and tax-free accounts includes calculating tax consequences oversaid time horizon for said entity based on said amounts to invest. 9.The method of claim 8 wherein said step of determining an amount toinvest from said taxable and tax deferred accounts further includes:performing sampling steps a plurality of times, said sampling stepscomprising: randomly selecting amounts from said tax-free accounts toinvest in each of said plurality of investments; determining appropriateamounts from said taxable accounts so that said selected percentageamounts for each of plurality of investments is satisfied; anddetermining a result if said amounts were invested as selected anddetermined for said time horizon.
 10. The method of claim 8 wherein saidstep of determining an amount to invest from said taxable and taxdeferred accounts further includes: creating a plurality of GAchromosome structures, each GA chromosome structure including a valuefor each of said plurality of investments, each value being anindication of an amount from said tax-free accounts to invest in saidcorresponding investment; setting said values in said plurality of GAchromosome structures to initial settings; evaluating fitness of saidplurality of GA chromosome structures; selecting at least one of said GAchromosome structures with an optimal fitness; and using said valuesfrom said selected GA chromosome structure as amounts from said tax-freeaccounts to invest in said corresponding investment for saidsubstantially maximal accumulation.
 11. The method of claim 10 furtherincluding the step of: calculating an improvement value of saidsubstantially maximal after-tax accumulation based on said determinedinvestment amounts from said taxable and tax-free accounts, as comparedto an after-tax accumulation based on said initial settings.
 12. Acomputer system for determining an optimal investment strategy for anentity with assets in taxable and tax-free accounts, comprising: meansfor obtaining tax information, account information, account amounts, andtime horizon information from said entity; a GA chromosome structure,for indicating an amount to invest in said taxable and tax-freeaccounts; means for obtaining initial amounts to invest in said taxableand tax-free accounts; means for calculating an after-tax accumulationbased on indications in said GA component structure; means for modifyingsaid GA chromosome structure to improve said calculated after-taxaccumulation; and means for displaying said resulting after-taxaccumulation.